Supply chain planning and control

Supply chain

• It is not a “one-way” chain, but a network of stages• Consists of all stages involved in fulfilling customer

demand• Includes: Manufacturers, External Suppliers, Vendors,

Transporters, Warehouses, Retailers, Customers • Supply chain management means management from

supplier of raw materials to the end customer. • Main activities if of supply chain management include

purchase raw materials, distribute , logistics, material management and CRM.

So, we find supply chain is the network of different operations.

SCM or Supply Chain Management Supply chain management is the management of

interconnected businesses that provide the package of products and services to the end customers.

In general, supply chain has two inter-related parts:Supply side – purchasing ( procurement) or buying

materials for production/manufacturing Demand side – distribution of finished goods and

services to the customer.

Objective of supply chain

The main objective of supply chain is to satisfy the customer.

Or Meet the requirements of the end customers by

supplying appropriate products and services, when they are needed, at a competitive price.

MAIN OBJECTIVES OF SUPPLY CHAIN

• QUALITY – maintain the quality of products and services.

• Speed – how fast customers can be served • Dependability – on time as promised to the

customer • Flexibility- ability to adjust to changes and

disturbances ( also known as agility)• Cost- competitive cost and appropriate price

Different costs involved:

• Cost of finding supplier • Making agreements • Monitoring supply performance • Transportation • Inventories

Supply VS Logistics

• supply – is related to the purchasing • Logistics – is related to the distribution

Supply chain management deals with purchasing and distribution management.

Supplier selection Page 407 table 13.1

Single and Multi-Sourcing

Single- sourcing – source( buying, finding, evaluating) from single supplier.

Multi – Sourcing – sourcing from different suppliers. Advantages and disadvantages of single and multi-sourcing?

Page 409 13.3 Internet and E-procurement Businesses uses internet to find out suppliers and alternatives

these days. E-procurement means use of internet to organize purchasing.

This includes identifying potential suppliers , auctioning, as well as administering of tasks via internet.

Three parts of E-procurement

• Identify • Payment process • Manage

Advantages and disadvantages of E-procurement

Advantages Disadvantages

Promotes efficiency Prevent development of closer partnership type relationship

Improves relationship with suppliers Avoid long term benefits

Reduces transaction costs

Increased competition and competitive price Improves ability to manage supply chain

Electronic market place

Internet based or online market place, where suppliers and purchasing companies meet together.

Electronic market place is an information system that allows, buyers and sellers to exchange information about prices and product offerings. Three categories of electronic market places.

Three categories

• private – buyer and seller conducts business with partners only.

• Consortium – several large business firms combine together for buying and selling.

• third-party – a third party creates unbiased e-market place for buyers and sellers.

Scope of E-procurement Everything is not bought electronically. For example

office stationeries of basic elements are only procured this way.

Is it necessary to e-procure?

We have to analyse the following points to make the decision.

1. Is value of spend on high or low? – if high cost e-procurement is good.

2. Is there high competition – select the right suppler if the competition is tough.

3. How efficient are your internal processes? – If poor internal process, e-procurement will

reduce the cost.

Global sourcing

Sourcing products and services from outside the home country.

It includes the following steps:1. Identify2. Evaluate 3. Negotiate 4. Configure supply

Factors that promote global sourcing:

1. The origin of trading blocs – ASEAN, EU, NAFTA, where tariffs got removed or reduced.

2. Effective transportation infrastructure 3. Tough competition making the price lower.

Global sourcing

Disadvantages increasing complexity Management problems Risk of delay Language problems Social, cultural and religious differences.

How to evaluate the global outsourcing opportunities?

• purchase price - total price • Transportation cost - total transportation cost • Inventory carrying cost - storage, insurance,

depreciation, obsolescence • Cross boarder tax, duty, tariffs • Supply performance – cost due to delay • Supply and operational risk - war, political

problems, terrorist attacks, natural disaters

Suppliers selection policy

Local suppliers are easy to be monitored, while the global suppliers are having different culture, language and traditions, so many companies are formulating a policy as part of social responsibility, which is known as suppliers selection policy.

Physical distribution management

delivering products and services to the customers. Logistics- distribution of products and services to the

customers. Distribution management and internet Distribution is enabled via online sources, for example e-

commerce . What is back-loading? This is related to the transportation companies, who

transport goods to a particular point and when comes back, it loads for another customer and avoid the waste in the total cost.

Merchandising

Purchasing task connected with sales and physical distribution, it is known as merchandising.

For example the supermarkets, where care is given for the appealing look of products to ensure maximum sales.

Types Relationship in a supply chain

• B2B – Between two companies • B2C – Companies to customer usally online

example amazon.com • C2B – Consumer posts the need on the web

along with the price that he/she willing to pay and the companies decide whether or not to sell.

• C2C- Online exchanges and auctions.

2. Traditional market supply relationship

a short- time relationship between the buyer and seller, where the relationship ends with delivery and payment.

Advantages Disadvantages Suppliers compete themselves to be selected, thereby best value can be expected.

Uncertainty

High flexibility Time consuming to decide the right supplier

Innovations Over- dependence on suppliers reduce internal capability

Suppliers allow business to concentrate on their main activity

3.Virtual operation

an operation that outsource almost everything, for a project and disbands the same once the project over. For example Hollywood movie, software manufacturing.

4.Partnership supply management Making the lasting relationship agreements to

achieve the business goals. Factors affecting partnership business relationship? Page 418 and 419

CRM

WAL-MART explains a practical example for CRM. Beer Nappies

CRM is a method of learning more about customers needs and behaviors in order to develop stronger relationships with them.

CRM, helps the organizations to understand their customer and customer’s needs.

CRM is related to information technology. CRM brings such a lot of information related to the customer.

CRM benefits:

• Provide right products and services to the customers.

• Retain existing customers and discovering the new ones.

• Give better customer service • Cross selling or additional selling effectively.n

Supply chain behavior.HOW DO SUPPLY CHAINS BEHAVE IN PRACTICE?

• supply chain behaves differently in different markets. So, one idea to manage the supply chain is to organize the supply chain in different markets differently.

• Effective supply chain – keep inventory level low

• Responsive supply chain – high service level and keeping inventory close to the customer.

Supply chain dynamics

• the tendency of supply chain to make changes in demand side, and creating large disruptions in supply end is known as Bullwhip Effect.

Supply chain improvement 1.Effects of E-business E-business provide most effective information, that

the supply chains need badly. Collection, analysis and distribution of information

using e-business is cost effective.

2. Sharing information

sharing information in supply chain helps supply chain management.

3.Chanel alignment – adjustment of scheduling, materials movements, stocking, pricing so that all the operations in the chain well coordinated.

Vendor management - one type of supplier management inventory, where one level of supplier do the inventory of other level. For example a packaging material supplier, making the inventory of the stock of packaging material in a supermarket.

4.Operational efficiency

Reduce complexity so reduce the cost of doing business with other operators in the chain.